Service Tax on Construction of Residential Apartments

This query is : Resolved

Rasesh (Querist)
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14 August 2010 Suppose a builder wants to collect and pay service tax, which the best scheme available to him.

1) 75% abatement
2) 67% abatement
3) 4.12% WCT (whether available to him)
4) 10.30% only on Labour (whether available to him)

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 August 2010 All the schemes are having own limitations and advantage

option 1 & 2- you may not claim cenvat input

option 3 - you can avail cenvat, but threre is no segragation of material and labour, total contract value will be the taxable.

Option 4- Manitenance of invoice separately labour and mateirals and cenvat input also available

Rasesh

Rasesh (Querist)
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14 August 2010 I agree on all the above.

Please clarify whether option 3 and option 4 are available to a builder selling residential apartments.

There is one view that since the entire tower is sold under different apartments, option 3 and 4 are not available to a builder.

Vipin Gupta

Vipin Gupta (Expert)
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14 August 2010 Dear Sir,

Since the builders get themselves registered under the work contract under the Existing VAT so they can definately take the benefit of 4.12 % Tax

Rasesh

Rasesh (Querist)
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16 August 2010 Correct me if I am wrong. The final understanding is as under:

1) Builder gets himself registered under work contract under existing VAT and takes benefit of 4.12% scheme

2) The apatments are sold before getting Completion certificate.

3) Builder pays Service Tax under the 4.12% and offsets it against input credit for services and capital goods (not for input goods).

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